Stock markets tumble as investors pull back from American assets
Wall Street weakened Monday as investors worldwide became more skeptical about American investments, something many economists suggest is due to U.S. President Donald Trump’s trade war and his ongoing criticism of the Federal Reserve.
The S&P 500 sank 2.4 per cent in another wipeout. That yanked the index 16 per cent below its record set two months ago.
The Dow Jones Industrial Average dropped 971 points, or 2.5 per cent, while losses for Tesla and Nvidia helped drag the Nasdaq composite down 2.6 per cent.
In Canada, the main S&P/TSX composite index fell 0.76 per cent today.
Perhaps more worryingly, U.S. government bonds and the value of the U.S. dollar also sank as prices retreated across U.S. markets. It’s an unusual move because the value of U.S. Treasurys and the dollar have historically strengthened during episodes of nervousness. This time around, though, experts say it is policies directly from Washington that are causing the fear and potentially weakening their reputations as some of the world’s safest investments.
Trump kept up his tough talk on global trade Monday as economists and investors continue to say his stiff proposed tariffs could cause a recession if they’re not rolled back. U.S. talks last week with Japan failed to reach a quick deal that could lower tariffs and protect the economy, and they’re seen as a “test case,” according to Thierry Wizman, a strategist at Macquarie.
“The golden rule of negotiating and success: He who has the gold makes the rules,” Trump wrote in all capital letters on his Truth Social Network. He also said that “the businessmen who criticize tariffs are bad at business, but really bad at politics,” likewise in all caps.
Investors around the world are raising alarm bells after a third day of tariff-related market chaos, with one billionaire Trump ally even warning that not pulling back on tariffs could unleash a ‘self-induced, economic nuclear winter.’
Trump has recently focused more on China, the world’s second-largest economy, which has also been keeping up its rhetoric. China on Monday warned other countries against making trade deals with the United States “at the expense of China’s interest” as Japan, South Korea and others try to negotiate agreements.
“If this happens, China will never accept it and will resolutely take countermeasures in a reciprocal manner,” China’s Commerce Ministry said in a statement.
Also hanging over the market are worries about Trump’s anger at Federal Reserve Chair Jerome Powell. Trump last week criticized Powell again for not cutting interest rates sooner to give the economy more juice.
The Fed has been resistant to lowering rates too quickly because it does not want to allow inflation to re-accelerate after
slowing nearly all the way down to its two per cent goal from more than nine per cent…
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